February 10, 2021 (MLN): Out of 73 eligible countries to Debt Service Suspension Initiative (DSSI), Pakistan has the highest annual debt servicing payments to official bilateral creditor countries in 2020, standing at $4.26 billion wherein China is by far the largest creditor with $2.92 billion to Pakistan, followed by Japan with $388 million.
The latest data from the International Debt Statistics 2021, compiled by the World Bank, showed that Pakistan’s total debt service payments due for 2020 were recorded at $9.99 billion, including obligations to the International Monetary Fund (IMF), totaled at $1.21 billion at the end of 2020.
World Bank’s Debtor Reporting System (DRS) also projected debt service payments for 2021 totaled $9.48 billion, comprising $1.72 billion in principal payments and $7.76 billion in interest payments.
Debt Report 2021 Edition I by World Bank presented a regional and country-specific analysis of external debt stocks and flows of 120 low- and middle-income countries. As per the report, the combined external debt stock of DSSI-eligible countries rose by 9 percent in 2019 to $744 billion, equivalent on average to 33 percent of their combined GNI measured in nominal terms.
The net financial flows to countries eligible for the DSSI rose 16 percent in 2019 to $103 billion, a record high for the decade and much faster than those to other low- and middle-income countries. The increase in net financial flows was the outcome of a 10 percent rise in net debt inflows to $66 billion from $60 billion in 2018 and a 36 percent rise in FDI.
Eighteen DSSI-eligible countries accounted for 90 percent of the debt owed to all private creditors by DSSI countries at end-2019, and 92 percent of that was owed to bond-holders. In these 18 countries, private creditors’ share in end-2019 public and publicly guaranteed debt stock averaged 33 percent and ranged from 60 percent in Côte d’Ivoire to 13 percent in Pakistan, the largest debtor among DSSI-countries. Except for Cabo Verde and Chad, all DSSI- eligible countries with a significant share of debt owed to private creditors have issued Eurobonds and half of the 18 countries are blend IBRD/IDA or IBRD borrowers assessed as credit-worthy for market-based financing.
Regional wise, net financial flows of South Asia rose by 74 percent to $119 billion in 2019 was driven by the steep rise in debt and equity inflows to India. Net financial inflows to other countries in the region rose, on average, only by 3 percent.
Net debt inflows to India rose more than threefold to $40 billion. Half of these were long-term inflows from commercial banks to non-guaranteed private sector entities, largely intercompany lending in response to relaxation of investment barriers including in the retail and insurance sector.
The report said that net debt flows to other countries in the South Asia region fell, on average, 3 percent driven by a 43 percent drop in long-term debt inflows to Pakistan and a rise in principal repayments to bondholders and bilateral creditors. In contrast, net debt inflows to Sri Lanka rose 53 percent on account of the $4.4 billion sovereign bond issues in 2019.
The report highlighted that FDI inflows remained resilient, rising 11 percent boosted by a 10 percent increase in inflows to India to $43 billion, directed largely at the technology and communication industry. FDI inflows to Bangladesh also rose 5 percent to $1.3 billion, mostly into the garment industry, and inflows to Pakistan rebounded to $2 billion with investment in energy, textiles and the financial sector led by British and Chinese investors.
On the external debt stocks front, South Asian countries other than India, owed, on average, 83 percent of long-term external public debt to bilateral and multilateral official creditors at the end-2019. Their external public debt stock of $162 billion at end-2019 comprised of $73 billion (45 percent) owed to multilateral creditors, $62 billion (38 percent) to bilateral creditors and $27 billion (17 percent) to private creditors (bondholders, commercial banks and other private entities).
At the country level, the composition of external debt stocks varied. In four countries (Afghanistan, Bangladesh, Nepal and Pakistan) multilateral creditors accounted for over 53 percent of end-2019 external public debt, including Bangladesh (66 percent) and Nepal (87 percent).
Three countries, Pakistan and Maldives classified as a blend IBRD-IDA borrower creditworthy for some market-based financing, and Sri Lanka, an IBRD borrower, have issued bonds in international capital markets. Private creditors accounted for 13 percent of Pakistan's external public debt stock, 35 percent for Maldives and 48 percent for Sri Lanka.
The World Bank was the single largest creditor $38 billion at the end-2019, equivalent to 23 percent of long-term public debt stock, followed by China, $33 billion, and the Asian Development Bank, $30 billion.
Across the region, there is a significant divergence in debt burdens. Pakistan’s external debt-to-export ratio was 324 percent compared to 126 percent for Bangladesh and 72 percent for the Maldives at end-2019. The external debt-to-GNI ratio of Bangladesh remained low, 18 percent, and moderate, 37 percent, for Pakistan but rose to 53 percent in the Maldives, double the 2015 level. The regional average for the ratio of international reserves to external debt, 64 percent at end-2019, was also heavily weighted by India which had reserves equivalent to 77 percent of external debt stock. This ratio varied considerably for other countries from 56 percent in Bangladesh to an average of 12.5 percent for Pakistan and Sri Lanka.
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